Mortgages

A residential mortgage is a loan specifically used to purchase or borrow a home or property. It is secured by the property itself, meaning if the borrower fails to make payments, the lender has the right to take action against the property, including by possession or power of sale of the property.

Yes, a mortgage loan can be used to build or renovate your home. Usually, the mortgage loan is advanced in stages as construction progresses and is converted to a typical mortgage term upon completion of work. Speak to us about a mortgage solution that fits your build or renovation plans.

In Canada, common types of mortgages include fixed-rate mortgages, where the interest rate remains constant for the entire term, and variable-rate mortgages, where the interest rate can fluctuate based on market conditions. There are also options for open mortgages, closed mortgages, and hybrid mortgages, offering various terms and conditions.

The minimum down payment required for a mortgage in Canada depends on the purchase price of the property and Canada’s lending requirements for insured mortgages.⁷ The minimum down payment is 5% of the purchase price for homes valued up to $500,000. For homes priced between $500,000 and $1 million, the minimum down payment is 10% on the portion exceeding $500,000. A 20% downpayment is required for homes over $1 million. These minimum downpayment amounts are subject to UCU’s credit granting criteria, which may require higher a higher downpayment.

Mortgage interest rates in Canada are influenced by several factors, including the Bank of Canada’s overnight lending rate, bond yields, inflation rates, and economic conditions. UCU’s credit granting criteria also considers your credit score, debt-to-income ratio, and the size of your down payment when determining your specific interest rate.

Closing costs are expenses incurred during the home-buying process, usually paid by the homebuyer on the closing date. These costs can include legal fees, land transfer taxes, title insurance premiums, appraisal fees, and adjustments for property taxes. It’s essential to budget for closing costs when planning to purchase a home in Canada.

Yes, most mortgages in Canada allow for prepayment, either in part or in full, before the end of the term.⁴ However, there may be prepayment penalties or restrictions depending on the type of mortgage you have. It’s important to review your mortgage terms and speak with your lender to understand any potential penalties associated with prepayment.

Mortgage default insurance (like CMHC insurance), also known as mortgage insurance, is required for homebuyers in Canada who have a down payment of less than 20% of the purchase price. This insurance protects the lender in case the borrower defaults on the mortgage. The cost of mortgage default insurance is typically added to the mortgage loan amount and repaid over time as part of the mortgage payments.

Yes, it is possible to switch or refinance your mortgage before the end of the term.⁴ However, there may be penalties or fees associated with breaking your current mortgage contract early. It’s essential to consider these costs and compare them to potential savings or benefits before deciding to refinance your mortgage.

The difference between a mortgage renewal and a refinance are in their purpose. A renewal takes place at the end of the mortgage term and the existing mortgage loan balance may “roll over” on new terms and conditions for length of time and interest rate acceptable to both lender and borrower. Otherwise, the lender is entitled to be repaid the mortgage loan balance in full. A refinance is usually done when the borrower wishes to borrow additional funds, lower the cost of borrowing, or switch between fixed and variable mortgage loans. A mortgage renewal may be an opportunity to borrow additional funds through refinancing the mortgage.

A mortgage pre-approval is a process where a lender assesses your financial situation and creditworthiness to determine the maximum amount they are willing to lend you for a mortgage, typically based on your income, assets and credit history.³

A mortgage term refers to the length of time your mortgage agreement is in effect, typically ranging at UCU from 6 months to 5 years, and influences and affects the overall cost of borrowing. For fixed-rate mortgages, the interest rate and other terms remain unchanged during the mortgage term. For variable-rate mortgages, the applicable interest rate may change during the mortgage term. The mortgage term is different from the amortization period. The remaining amortized loan balance is payable at the end of the mortgage term.

A mortgage payment schedule outlines the frequency and amount of your mortgage payments over the term of the loan. It details how much of each payment goes towards principal and interest, helping you understand how your mortgage balance decreases over time.⁸

A mortgage prepayment penalty is an amount charged by lenders when a borrower pays the mortgage before the end of the mortgage term, either through refinancing, payout when selling the property, or making extra payments beyond what is allowed in the mortgage agreement. This penalty compensates the lender for potential lost interest income.

The mortgage amortization period is the total length of time it takes to pay off your mortgage in full, typically ranging from 15 to 30 years. A longer amortization period typically results in lower payments but higher total interest costs of borrowing over the life of the loan, while a shorter amortization period typically results in higher monthly payments but lower overall interest costs.